X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
7 Questions You Need To Ask Your Financial Guardian - Outside View by PersonalFN
Boost Trading
Profits in Four
Easy Steps
DOWNLOAD NOW!
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

7 Questions You Need To Ask Your Financial Guardian
Jan 27, 2017

There is no dearth of financial advisors in the country. Every one represents him/her as a sensible, well-intentioned financial advisor. Relationship managers at banks are no different. They portray to have the clients best interest in mind all the time. But that's seldom the case!

Take for instance the case of Mr Shivraj Puri...

Not too long ago (in 2010) Mr Shivraj Puri, a relationship manager with Citibank's Gurgaon branch (now called Gurugram) duped his clients for Rs 350 crore. This was the least expected of a seven-year veteran from the wealth management team of an esteemed international bank. Mr Puri channelled hard earned savings of 30 investors into the stock markets without their consent. He was suspended after the bank lodged a police complaint. He was booked for suspicious transactions, forgery, and criminal activities. The Courts pronounced Mr Puri guilty under various sections of the Indian Penal Code (IPC) and was sentenced to 2 years & six months imprisonment, plus a fine of Rs 10,000.

There are countless cases across the world where investors/clients (including celebrities) have been duped falling prey to sweet-talk of financial advisors. Relationship managers / agents / so-called financial advisors, have put their vested interest at fore; hauled out the most from the clients vide incentives / commissions. They tiptoe around real financial planning, and as a result you, the investor suffers; as they don't stand as 'Financial Guardians' who handhold in the journey of wealth creation and achieving financial goals. Many financial advisors have just resorted to unethical practices and made hay when the sun shines. This is disrespect to a profession where a financial advice should be given with utmost care and prudence.

Besides, as an investor it is your responsibility to protect your hard earned money. So, before you sign on the dotted line, ask these 7 questions to your Financial Advisor/Financial Guardian:

  1. The professional fees charged - In the financial advisory business, there are mainly 3 business models in India: fee-based, fee + commission, and purely commission driven. Assess which category the financial advisory you're dealing with fits into. It is ideal to take services of a financial advisor/guardian who charge professional fees for the services rendered (just like architects, doctors, lawyers, chartered accountants do). Keep away from advisors who follow a purely commission driven approach and even be careful while dealing with relationship managers who're driven by incentives.
  2. The credentials - Be sure to check the professional qualifications of the financial advisor/ financial guardian. Few professional institutions have a rigorous curriculum for aspirants. These institutions ensure their members follow a code of conduct and abide by the principles of ethics and integrity of the profession. Also, recognise how they manage to keep themselves abreast with the developments in the profession and even regulations related to it. Make sure that the credentials of the financial advisor/guardian are in force, i.e. whether certifications/ professional memberships are renewed. This would assure a prudent approach, better advice, better service and the commitment of the financial advisor/guardian towards his craft.
  3. Transparency / disclosure norms - Financial guardians/advisors who have undergone professional certifications and who strictly comply with the regulations usually vow by transparency. They abide by the principles of ethics and follow full disclosures as needed. This also helps to earn respect, trust, and loyalty of investors.
  4. How will financial goals be addressed - S.M.A.R.T goals are the bedrock when building a solid financial plan. Your financial advisor/guardian should be able to slice and dice your financial goals into should short-term, medium-term, long-term, and thereafter in consultation with you, draw a financial plan. This approach ensures a synchronised effort and perhaps even handholding in the goal planning exercise with correct documentation.
  5. How will my risk appetite be gauged - Goal planning exercise without assessing the risk profile is pointless and risky. If a financial advisor/guardian does not ask you pertinent question to gauge the quantum of risk you are willing to take and can afford, recommendations could look cockeyed. A risk profile helps a financial guardian to understand your outlook towards money and thereby determine the financial risk you can take. A holistic approach can even help in gauging your insurance needs (be it life insurance, health insurance, personal accident insurance etc.), even if it is beyond the scope of his/her work.
  6. How investment avenues would be selected - Different investment avenues pose different risk-return trade-off. They cannot be generalised by any means. So, the investment strategy you need to follow will change depending on your risk profile, the time horizon to achieve your financial goals, income, assets, contingency reserve, amongst a host of other aspects.
  7. How often will the portfolio/financial plan be reviewed - A regular portfolio review can help you ascertain if you're on the right track to achieve your financial goals. The review can be quarterly, semi-annually or yearly depending upon the complexity of the case and the dynamics involved. A corrective course, if required, should be proactively suggested by the financial advisor/guardian. Besides, there's operational support which ought to be well co-ordinated. A proactive approach on the part of the financial advisor/guardian augurs well for your portfolio/financial plan.

A Certified Financial Guardians (CFG) abides by all these vital aspects. They stand for high fiduciary standards. Irrespective of where you stand in your finances, be wise and seek a second opinion from a CFG. It is time to search for one nearest to you and take an appointment.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "7 Questions You Need To Ask Your Financial Guardian". Click here!

  

More Views on News

Tata Consultancy Services (TCS): A Decent Start to FY17 (Quarterly Results Update - Detailed)

Jul 14, 2016

Tata Consultancy Services (TCS) has declared results for the quarter ended June 2016. The company has reported a 3% QoQ increase in consolidated sales while the consolidated net profit was up 0.3% QoQ.

Tata Motors: A Profitable Fourth Quarter (Quarterly Results Update - Detailed)

Jul 8, 2016

Tata Motors Ltd has reported a 19% YoY and 202% YoY growth in sales and net profits for the quarter ended March 2016.

Idea Cellular: Interest Costs Hurt Profits (Quarterly Results Update - Detailed)

Jul 4, 2016

Idea Cellular has reported a 12.4% YoY growth in the topline and a decrease of 0.4% YoY in the bottomline for the quarter ended March 2016.

A 7-Step Approach Followed By Financial Guardians To Build Wealth (Outside View)

Feb 23, 2017

The term 'Financial Planner' may be used inaccurately by some financial advisors. Beware!

Why Bill Gates is Right About Robots Paying Taxes (Vivek Kaul's Diary)

Feb 23, 2017

There is a fundamental problem with the argument that robots are going to destroy human jobs.

More Views on News

Most Popular

My Six Rules for Stock Picking(Outside View)

Feb 11, 2017

A wealth-building strategy is more than just about how to pick good stocks.

18.24% Gains in 19 Days... And I Am Still Disappointed(Daily Profit Hunter)

Feb 14, 2017

Apurva closed a trade with gains of 18.24% for his Swing Trader subscribers. But he's not happy about it. Find out why.

Think Twice Before 'Buying' the Buyback(The 5 Minute Wrapup)

Feb 21, 2017

Why buybacks may not always be a tempting proposition.

India's Ecommerce Ponzi Scheme Has Started to Unravel(Vivek Kaul's Diary)

Feb 15, 2017

The investors are writing down their investments in these firms.

TCS Has Maintained a High Payout(Chart Of The Day)

Feb 21, 2017

Will the proposed buyback change the fortunes of TCS?

More

S&P BSE SENSEX


Feb 23, 2017 03:11 PM

MARKET STATS